The steam car.During the late 1700's, inventors dreamed of a “horseless carriage”—and steam seemed the obvious power source. In 1769 and 1770, Nicolas-Joseph Cugnot, a French military engineer, built the first self-propelled road vehicles, one that carried passengers, the other a three-wheeled steam tractor for hauling artillery. Richard Trevithick of the United Kingdom demonstrated in 1801 and 1803 four-wheeled steam-propelled road vehicles to carry passengers, but lacked the money to continue his work.

Numerous attempts in the United Kingdom during the 1820s and 1830s to promote the use and development of steam cars failed because of competition from railroad and stagecoach companies. Furthermore, early steam cars damaged roads, sometimes blew up, made a terrible racket, dirtied the air with smoke, and frightened horses. In 1865, the “Red Flag Law” ended further development of automobiles in the United Kingdom for about 30 years. Under the law, a steam car could go no faster than 4 miles (6 kilometers) per hour in the country and 2 miles (3 kilometers) per hour in town. To warn of its approach, a signalman had to walk ahead of the vehicle, swinging a red flag by day and a red lantern by night.

In the United States, inventor Oliver Evans demonstrated in 1805 a steam-operated dredge mounted on a boat. Evans put wheels on the boat and drove the gigantic machine, which weighed about 20 tons (18 metric tons), through the streets to the harbor and into the water. During the 1860's, another American inventor, Sylvester H. Roper, developed a much smaller steam vehicle that looked more like a present-day automobile. Many other Americans experimented with steam cars during the late 1800's. The number of U.S. companies that made steam cars grew rapidly. One of the most successful firms was founded by identical twin brothers, Francis E. and Freelan O. Stanley, who built the famous Stanley steamer.

Steam cars had big disadvantages. At first, it took too long for the fire to heat the boiler. Inventors solved that problem, but others remained. They were heavy and expensive. Over time, the steam-powered car gradually disappeared. In 1924, the Stanley brothers' company—one of the last steam car manufacturers—went bankrupt.

The electric car. About 1891, William Morrison, an American inventor, built a successful electric car. Electric cars quickly became popular because they were quiet, easy to operate, pollution-free, and reliable. In 1900, they accounted for 38 percent of all U.S. car sales. But few electrics could travel faster than 20 miles (32 kilometers) per hour, and the batteries had to be recharged at least every 50 miles (80 kilometers).And they could not be used in rural areas that did not have electricity. By 1905, only about 7 percent of all cars sold in the United States were electrics. See Electric car

The gasoline car.Along with the development of the bicycle, the internal combustion engine was most critical to developments in early automobile history. Credit for this power plant is normally given to Belgian inventor Etienne Lenoir. Living in France, Lenoir patented a two-stroke engine in 1860 that used illuminating gas (gas obtained from heating coal in large retorts) that was ignited by a spark generated by a battery and coil. Lenoir’s engine was noisy and inefficient, and it tended to overheat. Used in stationary applications to power pumps and machines, some 250 were sold by 1865. In 1876, Nicholas Otto (1832-1891) developed a four-cycle engine (intake, compression, power, and exhaust). Two engineers who had once worked for Otto, Gottleib Daimler and Wilhelm Maybach designed a 1.5 horsepower, 110 pound, 600 rpm “high speed engine” in 1885, and built several experimental vehicles between 1885 and 1889. Maybach, one of the most important engineer-inventors of this early period, designed the modern carburetor for mixing air and gasoline in 1893. In the meantime, Karl Benz (1844-1929) built an internal combustion engine powered tricycle in 1885 to 1886 and exhibited a design at the 1889 Paris Exhibition. By 1893 he had constructed an improved four-wheel car with a three-horsepower engine that sold well and was fairly reliable. More than 100 Benz vehicles were sold by 1898. An early leader, Benz was soon passed technologically, especially by French manufacturers.

The key French inventor-engineer of the late nineteenth century was Emile Constant Levassor, who took Gottleib Daimler’s engine and placed it in the front of the vehicle. Before Levassor’s untimely death, he proved the merits of his design in the 1895 Paris-Bordeaux-Paris race. At first, and for only a relatively short time, Paris was the center of the nascent global automobile industry.

The birth of the automobile industry. Until 1900, Europe led the world in automobile development and production. For example, Peugeot, a French firm, started making automobiles in 1890. Another French company, Renault, began producing cars in 1898. Fiat of Italy dates from 1899. France and Germany became the first large production centers.

The Duryea brothers, Charles E. and J. Frank, built the first successful gasoline car in the United States. The Duryea car was completed in 1893 and made its first successful run in 1894. Often bicycle or carriage manufacturers, a number of automaking firms were started in the United States during the industry's early years. Some quickly failed, but others still produce vehicles. The center of the auto industry shifted from Europe to the United States after 1900. Production of American cars increased from fewer than 5,000 in 1900 to more than 1 1/2 million in 1916.

Many historians credit the 1901 Oldsmobile with being the first mass-produced car. More than any car before, this automobile was built of parts made by outside suppliers and shipped to the assembly plant. Mass production took a giant step forward in 1904, when Henry M. Leland took charge of the Cadillac Automobile Company and began building cars using interchangeable parts. Such parts could be used to assemble or repair any car of the same model. Previously, most parts were made to fit only one particular car.

But more than anyone else, the American industrialist Henry Ford perfected the mass production of automobiles. Ford understood that there existed a huge market for cheap, reliable automobiles, and in 1908 started production of the Model T. In 1913, Ford installed a moving assembly line in his car factory. The frame of the car was pulled through the plant by a chain. Workers on each side assembled the car by adding parts that had been brought to them on conveyor belts. This process resulted in a huge cut in production time and costs.

Technological advances came quickly after the birth of the auto industry and helped make cars safer, more comfortable, and easier to operate. One major development was the introduction of the electric self-starter. Charles F. Kettering, an American engineer, invented it in 1911, and General Motors installed the first ones in its 1912 Cadillacs. The self-starter ended the need to insert a crank into the front of the engine and then turn the crank by hand until the engine started. Hand-cranking was difficult, troublesome, and sometimes dangerous.The self-starter put increasing numbers of women behind the wheel.

World War I. World War I (1914-1918) demonstrated the value of motor vehicles for military purposes. In September 1914, German forces advanced on Paris. The French used Paris taxicabs to rush soldiers to the battlefront. In 1916, the Allies saved Verdun, France, from German capture with the help of fresh troops and supplies carried to the front by trucks. Car manufacturers produced large quantities of war goods for the Allies. They made military trucks and tanks, airplane engines, and other military supplies.

In the United States, people continued to purchase cars for personal use. Automobile production fell for the first time in 1918, reflecting chiefly a shortage of materials. After the war, the industry expanded again.

The Roaring Twenties. An economic slump struck the United States in 1920 and 1921. The sagging economy hurt the U.S. auto industry badly and resulted in major shifts in the leadership of the big companies. In 1923, Alfred P. Sloan became GM's president. He developed several ideas that the entire industry came to adopt. Sloan sought to stimulate sales by changing model styling each year. The tactic is often described as planned obsolescence—the manufacture of products designed to become outdated sooner than might be expected. GM and other companies built cars that offered comfort, styling, and speed at reasonable prices. This forced Henry Ford to stop making the Model T in 1927. He introduced the Model A in late 1927. In 1928, it became the top-selling car, but the Model A held that position for only a short time.

The rise of the Big Three. Sloan also set up a system of group management in which each GM car division would be independent and responsible for its own operations. Yet the head of GM would still have tight control. Sloan thus established an organizational structure for managing the huge companies that the major automakers became.

During the 1920's, the large manufacturers cut their profits on each car to step up their sales. Soon, only companies that could make and sell many cars quickly could stay in business. The number of U.S. automakers dropped sharply—from 108 in 1923 to 44 by 1927.

The hard times of the 1930's. The auto industry suffered severely during the Great Depression, which began in October 1929. In the United States, production of all vehicles fell 36 percent in 1930 and 29 percent more in 1931. In 1932, output plunged an additional 44 percent to about 1,300,000 vehicles, the lowest volume since the war year of 1918. Ford and Chrysler lost money, but GM made a profit throughout the 1930's. By the end of the decade, the Big Three controlled over 85 percent of the car market. Many firms had gone bankrupt. Others had shifted to truck production and managed to survive. During this same period, these companies also set up factories in Australia, the United Kingdom, and other countries.

Because of plant closings and lowered production, autoworkers were periodically jobless during the Depression. Autoworkers responded to speed up and job losses by supporting unionization, which ultimately succeeded in the auto industry by the late 1930s.

World War II and the postwar years.Automobile manufacture in Europe was halted in 1939 by the outbreak of World War II (1939-1945). In the United States, the automakers turned their production capacity to making war equipment and became the “Arsenal of Democracy.” This equipment included not only military trucks, jeeps, and personnel carriers, but also tanks, aircraft and aircraft engines, ammunition, artillery, and marine engines.

After the war, the auto industry resumed civilian production. The return of former servicemen and women, the enormous growth of the suburbs, and the unsatisfied demand for cars during the war all created a huge market for automakers. During the 1950's, performance and styling became keys to selling. American cars became longer, wider, and lower. Automatic transmissions became available in low-priced cars. Engine power and electric motors operated air conditioning, brakes, seats, steering, and the tops of convertibles.

By the late 1950's, imports—especially the West German Volkswagen Beetle—began to take a growing share of the U.S. market. Imports reached 10 percent in 1959 but then temporarily declined until the late 1960s. In 1964, Ford introduced the Mustang, a smaller, sportier car than most compacts. Car buyers loved the Mustang at first sight. That same year, Pontiac came out with the GTO, and for a short time it was the era of the “muscle car” in America.These cars were blindingly fast, yet also rather unsafe due to inadequate brakes.

The growth of government regulation. In 1965, an American lawyer named Ralph Nader wrote Unsafe at Any Speed. The book attacked Chevrolet's Corvair in particular and the auto industry in general for emphasizing profits and style over safety. Corvair sales plunged, and Chevrolet stopped producing the car in 1969.

Until then, the U.S. auto industry had operated largely free of government regulation. The situation changed in the 1960's, partly because criticism of the automobile had increased, especially after Nader's book appeared.The 1966 National Traffic and Motor Vehicle Safety Act ordered certain changes to promote automobile safety. To meet U.S. federal standards, automakers had to equip new cars with such safety features as safety belts, air bags, and shatterproof windows. Other required equipment included a collapsible steering column and bumpers that can absorb the impact of collisions.

The rise of international automaking. During the 1960's, the auto industries of France, Italy, Spain, Sweden, and West Germany prospered. The Soviet Union and Italy agreed to produce Italian Fiat cars in the U.S.S.R. The Australian auto industry thrived, and Argentina and Brazil expanded production. Japan, however, made the most dramatic progress. Japanese production skyrocketed from about 50,000 cars in 1958 to more than 2 million by 1968.

A worldwide petroleum shortage during the 1970's resulted in high gasoline prices and long lines at filling stations. Many families with large automobiles switched to smaller, lightweight cars that were more fuel-efficient. In the United States, imported cars became popular because of their reputation for fuel efficiency. By 1980, imports had captured more than 25 percent of the U.S. market, and Japanese cars accounted for more than 80 percent of those sales.

Challenges to the Big Three. The oil shortage led the U.S. Congress to pass a law in 1975 requiring manufacturers to make cars more fuel efficient. The 1974 cars averaged 14 miles per gallon (6 kilometers per liter) of gasoline. Under the new law, the 1985 models had to average 271/2 miles per gallon (11.7 kilometers per liter). The Big Three met the requirements by building lighter cars with smaller engines and by making mechanical improvements. However, they could not match the Japanese automakers in terms of quality. Congress demanded even greater fuel efficiency in the 1990's.

The switch in consumer preference from large cars to small ones helped Japan surpass the United States as the world's largest automaker for the first time in 1980. The shiploads of imported cars pouring into the United States stunned the Big Three. The price of a new car rose sharply during the early 1980's. As a result, people kept their old cars longer before buying a new one.

Chrysler, in deep financial trouble, needed $1 1/2 billion in government-guaranteed private loans to survive. Lee Iacocca, head of Chrysler, turned the company around for a time. Chrysler received the loans in 1980 and repaid them within three years. In 1984, Chrysler introduced a line of minivans that achieved huge success in the marketplace. In 1987, the company bought American Motors, which the French automaker Renault had largely controlled since 1977.

In 1981, the U.S. and Japanese governments placed voluntary restrictions on the export of Japanese cars to the United States. The restrictions encouraged Japanese carmakers to produce vehicles in the United States themselves. By the late 1990's, several Japanese manufacturers had assembly plants in the United States.

Recent developments. Light trucks and sturdy SUV's became increasingly popular in the United States. In the 1990's, U.S. production of such vehicles surpassed that of passenger cars. This shift toward big, fuel-hungry vehicles eventually created problems for U.S. automakers after a global economic recession began in 2007. As the economic downturn took hold, demand for vehicles dropped dramatically. Most of the remaining buyers wanted small, fuel-efficient automobiles. The changing market left American automakers struggling to survive. Both Chrysler and GM needed billions of dollars in loans from the U.S. federal government. Despite these loans, Chrysler filed for bankruptcy in 2009.

About 620 million passenger cars travel the streets and roads of the world. Most automobiles are in the United States, Japan, Canada, and the countries of Western Europe. But in the past few years the emerging markets of China and India have become huge. In 2009, more cars were sold in China than in the United States for the first time.

Particularly after the gasoline price run-up in 2008 and the recession that followed, many consumers today purchase fuel-efficient vehicles. Such vehicles include hybrids, most of which combine an internal-combustion engine with a rechargeable electric battery to conserve gasoline. Cars powered solely by electric energy have limited battery life and so cannot travel long distances. But such cars may prove more feasible with widespread improvements to the power grids, offering drivers more places to "plug in" their cars. In addition, engineers and scientists are working to develop fuel cells, devices that convert chemical energy to electric energy, to power cars instead of gasoline.Finally, as temporary measure, some automobiles now run on biofuels that include ethanol made from corn and sugar cane.

Despite technological advances, the auto industry faces many challenges. Rising fuel costs have made large, inefficient vehicles less popular with consumers.